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Colonial Cases

Hatch, Forbes and Co. v. Forbes, Graham and Co., 1885

[sale of goods]

Hatch, Forbes and Co. v. Forbes, Graham and Co., 1885

Supreme Court for China and Japan

Rennie CJ, 17 November 1885

Source: North China Herald, 18 November 1885

Shanghai, 17th Nov., 1885
Before Sir Richard T. Rennie, Kt., Chief Justice.
HATCH, FORBES & CO. (Defendants and Appellants)
FORBES, GRAHAM & CO. (Plaintiffs and Respondents)
  This was an appeal from a judgment delivered by Byron Brenan, Esq., H.B.M.'s Consul at Tientsin.
  M. Wainewright appeared for the Appellants and Mr. Dowdall for the Respondents.
 From the evidence given in the Court below, which was read by Mr. Wainewright, it appeared that in January, 1885, a Chinaman named Wang Fu-cheng purchased from Messrs. Forbes, Graham & Co, on credit, a hundred cases of glass. Wang Fu-cheng was at this time indebted to Messrs. Hatch, Forbes & Co., and this firm knew that he was in monetary difficulties.  A few days later, Messrs. Hatch, Forbes & Co.'s comprador had a transaction with Wang Fu-cheng which resulted in his obtaining delivery of seventy out of the hundred boxes of glass, the value of which, at a price slightly lower than that at which Wang had purchased them, was set off against Wang's indebtedness to the firm.  This transaction was alleged by Messrs. Hatch, Forbes & Co., to have been a bona fide sale by Wang to them, through their compradore, of the hundred boxes, although only seventy were delivered.  
 It was admitted that in the first instance the compradore snatched the papers relating to the original sale by Messrs. Forbes, Graham & Co., out of Wang's hands, and refused to give them up again; but on the other hand it was also admitted that Wang subsequently assisted the compradore to obtain delivery of the seventy cases from Messrs. Forbes, Graham & Co.'s godowns.
 When taken delivery of the seventy boxes were stored in a Chinese hotel in Tientsin City, part of which was rented by Messrs. Hatch, Forbes & Co. through their compradore.  Wang Fu-cheng never paid Messrs. Forbes, Graham & Co. for the glass; and that firm claimed the glass on the ground that they still held a vendor's lien on it, disputing the right of Messrs. Hatch, Forbes & Co. to retain it.
  The judgment given in the Court below was as follows:-
 It appears from the evidence in this case that on 10th January last., Wang Fu-cheng bought on credit of Forbes, Graham & Co. 100 boxes of glass at Tls. 3.2 a case, and that on the 17th January, Wang Fu-cheng obtained delivery of 70 boxes and handed them to Hatch, Forbes & Co. in part payment of debt by him to the defendants.  
  The first question I have to decide is, did Wang Fu-cheng obtain the glass by fraud practiced on the vendor under colour of a purchase? Chitty on Contracts says:-
 "If a vendee purchase the goods with the pre-conceived design of not paying for then, such sale does not pass the property therein.  And it would appear that the re-sale of the goods by the vendee at reduced prices immediately after they got into his possession is evidence of such fraudulent intention."
 Taking this into consideration, together with the fact that Wang Fu-cheng at the time he obtained possession of the glass from Forbes, Graham & Co. was virtually insolvent, and a bankrupt, I must decide that Wang Fu-cheng obtained possession of the goods by means of a fraudulent purchase.
 Now as to the transactions between Wang Fu-cheng and Hatch, Forbes & Co., Chitty lays down that if the seller do not elect to treat the sale as void before the buyer has resold the goods to an innocent vendee, the property therein will pass to that vendee.  Again, Addison on the Law of Torts states at Common Law the purchaser of a chattel takes the chattel with such a title only as the vendor had unless he purchases in market overt. But if the title of the vendor is voidable only, he can confer a good title on an innocent purchaser for valuable consideration which becomes such before the vendor's title has been voided.
 Addison again states that if a man obtains possession of goods and resells them and delivers them into the hands of a bona fide purchaser before the vendor interferes to recover possession of them, the title of such bona fide purchaser cannot be defeated.
  What I have to decide therefore is, was the defendant an innocent or bona fide purchaser for valuable consideration?
 Now I find in the evidence that the defendant knew that Wang Fu-cheng was in difficulties and had been so for some time.  On the 17th Jan. defendant states that he bought 100 boxes of glass from Wang Fu-cheng.  He knew that Wang Fu-cheng had agreed to pay plaintiff Tls. 3.2 a box, that this glass could not have been paid for, and that Wang Fu-cheng was offering to sell to him, the defendant, at the price of Tls. 3 an article which he would have to pay Tls. 3.2 for to the plaintiff from whom he obtained delivery.  I fund further that although he defendant claims that he had purchased 100 boxes from Wang Fu-cheng, and obtained from him a delivery order for that quantity, he rests satisfied with the delivery of 70 cases and makes no claim on the plaintiff for the 30 cases short.  This circumstance casts suspicion on the bona fides of the transaction. In my mind there is no doubt that the defendant was aware that Wang Fu-cheng was defrauding the plaintiff in order to prefer him, the defendant.  I cannot therefore admit that the defendant was an innocent or bona fide purchaser.  I have some doubts whether he can be called a purchaser at all.  In Smith's Mercantile Law I find a distinction is drawn between a sale by an insolvent debtor of his property in consideration of certain purchase money, and the transfer by the debtor of the property for a by-gone and before contracted debt.  In the first case - that is the case where a sale was made for money - the assignment would be upheld provided the buyer was a man of business had no reason to suspect that the seller was defrauding his creditors, but in the second case - that is the case where the assignment is made for a by-gone and before contracted debt - the assignment is fraudulent.  The sub-purchaser's title therefore would be imperfect, and much more so if he had reason to believe the seller was defrauding his creditor.
 If the defendant therefore in this case had parted with good money, as a bona fide purchaser, I should have upheld his title.  As a matter of fact I find that he has parted with nothing, and that he must have known that the effect of the transaction he was engaged in would be to defraud the plaintiffs to the extent to which the defendant was profiting.
 I feel I should add that while the defendant is certainly at law responsible for the acts of his agent or compradore, the evidence shows that the defendant, at the time, was ignorant of what was being done in his name.  I give judgment for the plaintiffs and order that the defendants restore to them the 70 cases of glass in dispute, costs to follow judgment.
(Signed) Byron Brenan, Judge of the Court.
  The defendants appealed against the judgment on the following grounds:-
Wang Fu-cheng was not a bankrupt at the time of sale or delivery of the glass, and explained that as the market value of the glass sold was never higher in Januaty, 1885, than Tls. 2.90 to Tls. 300 per case, Messrs. Forbes, Graham & Co. in selling at Tls. 3,20 and delivering must have intended to give long credit to their buyer.
Messrs. Forbes, Graham & Co, had had previous transactions with Wang Fu-cheng, and it will be observed sold the glass on the 10th of January, delivered some on the 17th, and only on the 30th, which was on or about the Chinese New Year settling day, had Wang Fu-cheng imprisoned through H.B.M.;'s Consul.
The appellants pressed Wang Fu-cheng for delivery of the 30 cases of glass undelivered, but made no application t H.B.M. Consul to force delivery.  They however on the 26th January, in consequence of Wang Fu-cheng's failure to deliver these 30 cases glass, made application to H.B.M. Consul to obtain  payment of the balance of money still due for old iron sold to Wang Fu-cheng on credit, after only crediting him with the value of the 70 cases glass received.
Messrs. Forbes, Graham & Co. were and are in the habit off selling cargo to Chinese on credit, and it is believed that Wang Fu-cheng is still indebted to them for gods older than the window glass so bought on credit which has been resold and delivered by him to various merchants in the ordinary course of business.
The evidence does not prove that Wang Fu-cheng was a fraudulent purchaser of the glass, but on the contrary hat this particular transaction was carried out in the same way as he had been in the habit of doing business with Forbes, Graham & Co.
The evidence does not prove that the appellants were other than bona fide purchasers, and the delivery of the goods to them effectually transferred the property to the said appellants.
The respondents prayed that the appellants' petition might be dismissed on the following grounds:-
The evidence shows that the respondents contracted with Wang Fu-cheng to sell 100 boxes glass and carried out their part of the contract.  70 boxes were deposited at the Yeoh-jah-dien hotel, 30 boxes at the Wan-chu-toh shop.
Respondents never lost track of the 100 boxes of glass, and being unable to obtain payment addressed H.M.'s Consul on 30th Jan. asking him to use his influence with the local authorities to enable them to obtain possession of the glass, clearly giving the place of deposit of the 70 boxes of glass.
Appellants on 6th Feb. wrote H.M.s Consul:- "Wang Fu-cheng sold 70 boxers glass to us and the cargo remained in a neutral godown.  Mr. Forbes has not been paid for the glass and has interdicted the godown keeper from delivering the glass to us." Clearly proving that respondents had established their lien.
Evidence clearly showed that appellants never made any bona fide purchase of the glass in question from Wang Fu-cheng.  Two Hundred Taels said to have been credited Wang Fu-cheng against glass is not the  equivalent value of either 100 boxes at Tls. 3.The amount would either be Tls. 300 or Tls. 210 and no evidence was brought to show the reason of this discrepancy.
Appellants testimony throughout is contradictory and unsatisfactory, and their petition of appeal is not according to the evidence brought forward at the hearing of the case before H.M.'s Consul.
Mr. Wainewright in opening the case for the appellants, contended that there as no evidence at all to show that when Wang Fu-cheng bought the goods in question from Messes. Forbes, Graham & Co. he did not intend to pay for them.  He contended that the purchase by Wang from Messrs. Forbes, Graham & Co., and the purchase by Messrs. Hatch, Forbes & Co. from Wang were bona fide transactions, and that consequently Messrs. Hatch, Forbes & Co. were entitled to have the goods re-delivered to them.  He admitted that the evidence showed that Wang had in the first instance been unwilling to sell the glass to the appellants, and that the appellants' compradore, unknown to his employers, had apparently used somewhat strong measures to induce him to sell it; but if any one had a right to complain of the compradore's action in this respect it was Wang, and not Messrs. Forbes, Graham & Co.
 Mr. Dowdall, on behalf of the respondents, contended that the appellants had obtained possession of the glass neither by purchase nor by any legal method, and were therefore not entitled to retain it.  He further contended that Wang had originally obtained the glass from Messrs. Forbes, Graham & Co. by fraud, and that there was no evidence that the glass ever came into the possession of Messrs. Hatch, Forbes & Co., as only one room in the Chinese hotel in which it was stored was rented by the appellants' compradore - as a bed-room probably. He characterised the transaction by which Messrs. Hatch, Forbes & Co.'s compradore obtained the glass in strong terms.
 Mr. Wainewright, in reply, admitted that the action of the appellants' compradore had been somewhat high-handed; but he pointed out that although Wang Fu-sheng at first resisted the action of the compradore in taking the documents from him, he afterwards voluntarily gave up the seventy boxes and assisted the compradore to obtain delivery of them from Messrs. Forbes, Graham & Co's godown.  With regard to the question whether the appellant obtained possession of the glass he said it was quite clear that Wang took delivery; and unless he had obtained it by fraud, the respondent had no right to get it back from him, though they might sue him for the purchase money.  He contended, too, that it was a desperate argument that the particular room in the hotel in which the glass was stored was not the room rented by the appellants.  Messrs. Hatch, Forbes & Co. had, he argued, done nothing but what was fair and reasonable in endeavouring to obtain from Wang Fu-cheng a set-off against his indebtedness to them.   The law favoured those who were diligent, and there was nothing discreditable in a creditor trying to get paid before other creditors, so long as he did no defraud anyone. The appellants had no reason whatever to believe that Wang Fu-cheng had obtained the glass from Messrs. Forbes, Graham & Co. by mans of fraud, and they were therefore perfectly justified in endeavouring to obtain the glass from him as a set-off.
 His Lordship reserved judgment.


Source: North China Herald, 25 November 1885

Shanghai, 21st Nov. 1885
Before Sir Richard T. Rennie, Kt., Chief Justice.
HATCH, FORBES & Co. (Defendants and Appellants)
FORBES, GRAHAM & CO. Plaintiffs and Respondents.)
  Mr. Wainewright appeared for the Appellants and Mr. Dowdall for the Respondents.
This morning His Lordship delivered the following
  This is an appeal from a judgment of the Provincial Court at Tientsin, delivered on the 24th July last.
 The facts of the case are hardly in dispute and are very simple.  It appears that on the 10th January last, the respondents, as proved by a memorandum in writing of that day, bargained and sold on credit to one Wang-fa-cheng 100 boxes of glass at Tls. 3.2 per box, for which payment was to be made on the 30th of the same month, and they gave a delivery order for the goods.  On the 17th January the respondents gave delivery of these goods against the delivery order and purchaser's receipt, but the purchaser failed to pay the agreed price on the appointed date, and the respondents then requested H.M.'s Consul at Tientsin to assist them in recovering the gods.
  The appellants claimed the boxes of the same goods on the ground of having purchased them from Wang Fa-cheng, and the goods being assumed to be in the possession of the appellants the present suit was eventually instituted in the Court below by the respondents against the appellants for their recovery.
  The Judge of the court below very properly said that the first question he had to decide was, "Did Wang Fa-cheng obtain the glass by fraud practiced on the vendors under colour of a purchase?" - and having regard to the admitted fact that Wang made over the glass in question to the appellants at a somewhat lower price than that which had agreed to pay the respondents, and that Wang at the time he obtained possession of the glass was virtually insolvent - came to the conclusion that he (Wang) did obtain possession of the goods by means of a fraudulent purchase, and that consequently the appellants had no acquired a good title from him, and were bound to restore them to the respondents.
  I cannot agree with the conclusion of the lower Court on this all-important point.
  It is quite true, as is stated in the passage from Chitty on Contracts, cited in the judgment under appeal, that a resale of goods by a vendor at reduced prices immediately after they get into his possession is evidence of a fraudulent intention on his part when he purchased them, but such evidence would not be, in itself, conclusive.  Nor do I think it would be made so by the purchaser being (if he fact were so) virtually insolvent at the time of his entering into the contract for the purchase of the goods.
  In the present case it is clear that Wang purchased the goods in the ordinary way of business and at a fair credit price, and I cannot infer that he did not intend to pay for them simply because he was in difficulties at the time, or because under strong pressure from the appellants' compradore he subsequently made over the goods to them at Tls. 3 instead of Tsl. 3.2 per case. The appellants allege that the difference was partially if not wholly made up of allowance for broken glass, and they also suggest that the price at which they took them over was cash price as distinguished from the credit price at which Wang bought them.  Either of these explanations might be satisfactory, and the evidence clearly goes to show that in making the purchase Wang had no intention of reselling or handing the goods over to the appellants.  So far as his being in difficulties financially goes, it may be reasonably supposed that he hoped to make a profit out of the purchase, and that he was, in continuing to trade as long as he could, only doing what most traders, whether European or Chinese, usually do.
  I think then that the Court below was wrong in concluding that the respondents had a right to the redelivery of the goods in question either from Wang or any one else.  I think that the respondents, by making the sale on credit as they did and delivering the goods in pursuance of their contract, wholly divested themselves of any property in them, and that their only remedy therefore lay in their right of action against the purchaser for the price.
  Under these circumstances it is needless for me to enter upon consideration of whether the appellant's compradore was justified in putting the pressure he did put upon Wang to compel him to hand over the goods to the appellants, or as to whether the goods were, after delivery by the respondents, stored to the order of Wang or the appellants.
  It is very likely that had the parties been all British subjects and the purchaser (Wang) had been made bankrupt under British Law, the transfer of the goods to the appellants might have been held to be invalid as against the trustee in bankruptcy.  In that case the goods or their proceeds would have gone into the bankrupt's estate for the benefit of the general body of creditors, and the respondents would have derived some benefit therefrom pari passu with the other creditors, but that would have been all.
  I must then hold that the original plaintiffs and present respondents have failed from the inherent weakness of their own case, and that the judgment of the below must be reversed.
.  .  .  
By arrangement the costs were fixed at $75.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School